Dáil Éireann - Volume 677 - 05 March, 2009

Priority Questions. - Pension Provisions.

Deputy Róisín Shortall asked the Minister for Social and Family Affairs the steps she is taking to improve pension security for members of defined benefit schemes in the private sector. [9408/09]

  Deputy Mary Hanafin: The security of occupational pension schemes is of paramount importance to the Government. Trust law, under which most pension schemes are established, ensures that the assets of the scheme are legally separate from the assets of the employer and are not available to other creditors should an employer become insolvent. Trustees of occupational pension schemes have responsibility for ensuring that the entitlements of scheme members are adequately protected and that they receive the pensions due to them. In addition to the safeguards provided by trust law, the Pensions Act 1990 provides for the regulation of pensions schemes in Ireland. Under this Act, defined benefit pension schemes must meet a minimum funding standard, which requires that schemes maintain sufficient assets to enable them discharge accrued liabilities in the event of the scheme winding up. Where schemes do not satisfy the funding standard, the sponsors-trustees must submit a funding proposal to the Pensions Board to restore the scheme to full funding.

It is estimated that in excess of 90% of defined benefits pension schemes are in deficit. However, the full extent of the level of under-funding will not be fully apparent until all schemes carry out their next actuarial assessment and report the results to the Pensions Board. This Government has sought to ensure, in so far as it can, that sponsoring employers and pension scheme trustees have sufficient time and space to fully assess the implications of the current difficulties for their schemes and the remedial action they can take. Indeed, we recently implemented a number of short-term measures to ease the pressures including additional time for schemes to formulate funding proposals; greater flexibility — more than ten years — for recovery plans in appropriate circumstances; allowing a replacement recovery plan to extend [278] beyond the end date of the original plan; and enabling the board to take into account voluntary employer guarantees in approving recovery plans.

Furthermore, to ensure these concessions are not seen as a weakening of supervision arrangements, the Pensions Board will not accept recovery plans which do not demonstrate an appropriate investment approach. The Government is considering a number of options regarding the ongoing security of occupational pensions. Decisions made in this context will be considered as part of the development of the national pensions framework, which is due to be finalised shortly.

  Deputy Róisín Shortall: Is it not the case that the pensions area is yet another in which the Government failed to regulate or address the underfunding issue during the boom? We are now paying the price in so far as no policy is in place and no action has been taken in recent years.

Some 500,000 people depend on defined benefit pension schemes, the majority of which are underfunded. This is the Minister’s responsibility. The Green Paper on Pensions was published 18 months ago, but we still do not know her thoughts on it. What is the extent of the overall shortfall in funding in defined benefit schemes, what actions does she propose to take and how will she avoid exposing the State to substantial claims over defined benefit schemes in insolvent companies, for example, Waterford Crystal? Its workers made a proposal to deal with the pensions shortfall, but she rejected it and has consequently exposed the State to serious claims arising from the Robbins judgment in the European Court of Justice.

  Deputy Mary Hanafin: As I have indicated, we anticipate that approximately 90% of the funds are in deficit, but whether the level is 25% of 50% will not be known until actuarial certificates are submitted.

  Deputy Róisín Shortall: Does the Minister not have a consultant’s report?

  Deputy Mary Hanafin: The figure could be as high as €30 billion, a significant amount of money. I can understand people’s concerns about their pension schemes. Pensions are well regulated under trust law and the Pensions Acts, but there is scope for a tightening of regulation as has occurred in other areas, such as in the financial arena where regulation was not as tight as necessary.

Defined benefit schemes are private investment funds. While it is difficult for people to watch the funds into which they have been contributing running into difficulty, the Government’s first commitment is to the State pension. It must be remembered that the schemes in question are private schemes. However, the Government is considering a number of proposals and issues.

The European Commission is conducting an assessment of the impact of the ruling in the Robbins case. At the time, it was satisfied that Ireland was in compliance with all of the then regulations.

  Deputy Róisín Shortall: It was not. That is not true.

  Deputy Mary Hanafin: The Commission has not started its assessment of the requirements on individual countries.

  Deputy Róisín Shortall: The Minister is wrong, as the Commission is not satisfied that Ireland has made adequate provision. As a result of the significant Robbins judgment, the UK authorities took immediate action, but we have done nothing. Recently, the Commission stated that, despite a number of EU reports indicating that Ireland was still in breach of obligations, [279] no action has been taken. The Minister is exposing the taxpayer to major claims against the State.

What is the Minister’s position in respect of the proposal put to her by Waterford Crystal workers? Given her rejection of it, is she not exposing the taxpayer and what will she do in this regard?

  Deputy Mary Hanafin: When the Commission reviewed the transposition of Article 8 of the directive, it——

  Deputy Róisín Shortall: I am discussing the judgment, not the directive.

  An Leas-Cheann Comhairle: Allow the Minister to continue.

  Deputy Mary Hanafin: ——gave an assurance that Ireland had adequately transposed the provision. The implications of the Robbins judgment are being assessed fully by the Commission to discern whether it places additional obligations on member states.

  Deputy Róisín Shortall: The Minister is misleading the House.

  An Leas-Cheann Comhairle: The Deputy knows that she cannot make that charge.

  Deputy Róisín Shortall: As a result of the ruling, the European Court of Justice found that Ireland had not made adequate provision for pensions. The exposure exists there. It is not just a private matter that the Minister can disown. She has taken no action on the court’s finding.

  An Leas-Cheann Comhairle: We must move on.

  Deputy Mary Hanafin: The Robbins case was taken in the UK, not——

  Deputy Róisín Shortall: The Minister supported it.

  Deputy Mary Hanafin: ——by Irish workers. When the EU assessed the transposition of the directive, it stated that Ireland had, at the time, done so adequately. The Robbins ruling is being assessed to discern what additional obligations exist. The case was taken in the UK, not in Ireland.

  Deputy Olwyn Enright: It was a European court.

  Deputy Róisín Shortall: We are in the same situation as the UK. It took immediate action after the judgment, but we have done nothing.